Cross collateralization agreements are a form of security that can be used as collateral for many different loans. They also allow for the use of one property as collateral on more than one loan.
Cross-collateralizing properties are beneficial because they allow borrowers to create a pool of money and take out higher dollar amounts with lower interest rates or no interest. However, cross collateralization agreements may also be riskier. If a borrower defaults on one loan and the asset is seized, it will affect any other loans secured by that asset.
Below is a list of common sections included in Cross Collateralization Agreements. These sections are linked to the below sample agreement for you to explore.
Freddie Mac Loan Numbers - See Exhibit A
Property Names - See Exhibit A
CROSS-COLLATERALIZATION AGREEMENT - MASTER
THIS CROSS-COLLATERALIZATION AGREEMENT - MASTER (“ Agreement ”) is made as of the 23rd day of February, 2018 by KEYBANK NATIONAL ASSOCIATION, a national banking association (“ Lender ”) and those parties identified on Exhibit A (each, “ Borrower ” and collectively, “ Borrowers ”).
| A. | Pursuant to the terms of a Multifamily Loan and Security Agreement by and between Lender and each Borrower (each, a “ Loan Agreement ” and collectively, the “ Loan Agreements ”), Lender has agreed to make contemporaneous loans to each Borrower (each, a “ Loan ” and collectively, the “ Loans ”) in the original principal amounts set forth on Exhibit A . |
| B. | Each Loan is secured by a mortgage, deed of trust, deed to secure debt or other similar security instrument (each, a “ Security Instrument ” and collectively, the “ Security Instruments ”). Each Security Instrument encumbers the project identified on Exhibit A and the other real and personal property included within the definition of “Mortgaged Property” in that Security Instrument (each, a “ Mortgaged Property ” and collectively, the “ Mortgaged Properties ”). |
| C. | Each Borrower is an affiliate of each of the other Borrowers and will receive a direct and material benefit from the making of the Loans to the other Borrowers. |
| D. | Each Borrower acknowledges Lender is willing to make the Loans only if each Borrower agrees to the terms and conditions of this Agreement and the other Loan Documents, which provide, among other things, that each Borrower will be liable for the payment and performance of each of the Loans and that each Mortgaged Property will serve as collateral for each of the Loans (collectively, the “ Cross - Collateralization ”). |
| E. | Each Borrower further acknowledges that the benefits derived by such Borrower from the Cross-Collateralization are equivalent to the burdens imposed upon such Borrower and its Mortgaged Property by the Cross-Collateralization, notwithstanding that its Loan and the Related Loans may be of differing amounts. |
| Cross-Collateralization Agreement - Master |
| 1. | Definitions . For purposes of this Agreement (including the recitals above), the following terms will have the meanings indicated: |
“ Enforcement Action ” means a judicial or non-judicial foreclosure of or trustee’s sale under any Security Instrument, a deed in lieu of such foreclosure or sale, a sale of any of the Total Mortgaged Property pursuant to lawful order of a court of competent jurisdiction in a bankruptcy case filed under Title 11 of the United States Code, or any other similar disposition of any of the Total Mortgaged Property.
“ Event of Default ” is defined in Section 4.
“ Fraudulent Transfer Laws ” means Section 548 of Title 11 of the United States Code or any applicable provisions of comparable state law, including any provisions of the Uniform Fraudulent Conveyance Act or Uniform Fraudulent Transfer Act, as adopted under state law.
“ Indebtedness ” means, with respect to each Borrower, the “Indebtedness” as defined in the applicable Loan Agreement, exclusive of any sums payable by Borrower solely by reason of this Agreement.
“ Loan Documents ” means, with respect to each Loan, the “Loan Documents” as defined in the applicable Loan Agreement, including, without limitation, this Agreement.
“ Related Borrowers ” means, with respect to any Borrower, all of the other Borrowers.
“ Related Indebtedness ” means, with respect to any Borrower, the aggregate of the Indebtedness of all the Related Borrowers.
“ Related Loan Agreements ” means, with respect to any Borrower, the Loan Agreements relating to the Related Loans.
“ Related Loan Documents ” means, with respect to any Borrower, the Loan Documents relating to the Related Loans.
“ Related Loans ” means, with respect to any Borrower, the Loans made by Lender to the Related Borrowers.
“ Related Mortgaged Properties ” means, with respect to any Borrower, the Mortgaged Properties owned by the Related Borrowers.
“ Related Security Instruments ” means, with respect to any Borrower, the Security Instruments relating to the Related Loans.
| Cross-Collateralization Agreement - Master | Page 2 |
“ Total Indebtedness ” means, with respect to any Borrower, the aggregate of the Indebtedness plus the Related Indebtedness .
“Total Loan Documents ” means, with respect to any Borrower, the Loan Documents and the Related Loan Documents.
“ Total Mortgaged Property ” means, with respect to any Borrower, the aggregate of the Mortgaged Property and the Related Mortgaged Properties.
Capitalized terms not otherwise defined in this Agreement have the meanings set forth in the applicable Loan Agreements.
| 2. | Joint and Several Liability for Total Indebtedness; Integration of Obligations; Obligations Absolute . Each Borrower acknowledges and agrees that: |
| (a) | Borrower must pay not only the Indebtedness but all of the Related Indebtedness in accordance with the terms of the Related Loan Documents, and that such Borrower and the Related Borrowers are jointly and severally liable for the payment of the Total Indebtedness. |
| (b) | Lender, at its option, may treat the Loan and the Related Loans as separate and independent obligations of such Borrower, or may treat some or all of the Loans, and all or any part of the Total Indebtedness as a single, integrated indebtedness of such Borrower. |
| (c) | No invalidity, irregularity or unenforceability of any portion of the Total Indebtedness will affect, impair or be a defense to the recovery by Lender of any other portion of the Total Indebtedness. |
| (d) | Borrower’s obligation to pay the Related Indebtedness is independent, primary, and absolute, and will be performed without demand by Lender and is unconditional regardless of the genuineness, validity, regularity, or enforceability of any of the Related Loan Documents, and without regard to any circumstance, other than payment in full of the Related Indebtedness, which might otherwise constitute a legal or equitable discharge of a borrower, a mortgagor, a surety, or a guarantor. Each Borrower waives, to the fullest extent permitted by law, all rights to require Lender to proceed against any Related Borrower or against any guarantor of any of the Total Indebtedness or to pursue any other right or remedy Lender may now or hereafter have against any Related Borrower or any collateral for any of the Total Indebtedness. |
| 3. | Security Instrument Secures Related Indebtedness and obligations of Related Borrowers . Each Borrower acknowledges and agrees as follows: |
| (a) | The Security Instrument secures the obligation of Borrower and the Related Borrowers to pay both the Indebtedness and the Related Indebtedness. |
| Cross-Collateralization Agreement - Master | Page 3 |
| (b) | The Total Mortgaged Property secures the Total Indebtedness without apportionment or allocation of any Mortgaged Property or any portion of any Mortgaged Property (except that the Total Indebtedness may be apportioned among the Mortgaged Properties for the sole and limited purpose of determining the amount of transfer or recordation taxes or documentary stamps required in connection with recordation of this Agreement and the Security Instruments). |
| (c) | If any Borrower fails to pay fully, when due, any amount payable to Lender under this Agreement or any Loan Document, then Lender may elect, in its discretion, to treat that amount as being due and owing by all the Borrowers on a joint and several basis; to enforce its rights and remedies against and collect such amounts from Borrowers on a joint and several basis; and to recover such amounts from the value of each of the Mortgaged Properties, on a pro rata basis or otherwise, as determined by Lender in its discretion. |
| 4. | Events of Default . Each of the following events will constitute an “Event of Default” under this Agreement: |